Blog Coverage Siemens AG Bulks up its Digital Muscle and Announces Acquisition of Software Firm Mentor Graphics

Upcoming AWS Coverage on Hortonworks Post-Earnings Results

LONDON, UK / ACCESSWIRE / November 15, 2016 / Active Wall St. blog coverage looks at the headline from Mentor Graphics Corp. (NASDAQ: MENT). German conglomerate, Siemens AG announced on November 15, 2016, its decision to acquire US based software firm Mentor Graphics. The all-cash deal has an enterprise value of $4.5 billion. Register with us now for your free membership and blog access at: http://www.activewallst.com/register/.

One of Mentor Graphics’ competitors within the Technical & System Software space, Hortonworks, Inc. (NASDAQ: HDP), announced ON November 03, 2016, its financial results for the third quarter of 2016. AWS will be initiating a research report on Hortonworks in the coming days.

Today, AWS is promoting its blog coverage on MENT; touching on HDP. Get all of our free blog coverage and more by clicking on the links below:

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Commenting on the deal, Joe Kaeser, President and CEO of Siemens AG, said:

“Siemens is acquiring Mentor as part of its Vision 2020 concept to be the Benchmark for the New Industrial Age. It’s a perfect portfolio fit to further expand our digital leadership and set the pace in the industry.”

Walden C. Rhines, Chairman and CEO of Mentor said:

“Siemens is an ideal partner with financial depth and stability, and their resources and additional investment will allow us to innovate even faster and accelerate our vision of creating top-to-bottom automated design solutions for electronic systems.”

Acquisition Terms

As per terms of the merger agreement, Siemens will pay $37.25 in cash for each of Mentor Graphics’ share. The offer price is at a 21% premium to the closing price of Mentor Graphics’ shares as on November 11, 2016, the last trading date before the announcement.

The transaction will be finalized by the second quarter of 2017, subject to statutory approvals and customary closing conditions. Once the merger goes through, Mentor Graphics will become a part of the Product Lifecycle Management (PLM) software business of Siemens Digital Factory (DF) Division. Siemens Digital Factory division is the industry leader in automation technology and a leading provider of PLM software.

Activist hedge fund Elliott Management had acquired approximately 8.1% stake in Mentor Graphics on September 29, 2016, for approximately $200 million. And it is good to note that Elliot Management has given its approval supporting the deal.

Benefits of the merger

Siemens, as a part of its Vision 2020, is looking at expanding and strengthening its portfolio of industrial software. Mentor Graphics is a pioneer in design automation and industrial software ranging from Integrated Circuit (IC) and System-on-Chip (SoC) design to automotive electronics solutions. With the acquisition, Siemens will become a digital all-rounder with mechanical, thermal, electrical, electronic, and embedded software design capabilities.

Mentor Graphics recorded revenues of approximately $1.2 billion and an adjusted operating margin of 20.2% for the fiscal year ending on January 31, 2016. It has 5,700 employees managing operations across 32 countries globally. Siemens expects this to add muscle to its Digital Factory Division. The highly talented experts available to the company will help Siemens enhance its competencies in product design. Siemens will gain access to Mentor Graphics’ 14,000 global client accounts spread over communications, computer, consumer electronics, semiconductor, networking, aerospace, multimedia, and transportation industries.

With the merger Siemens, can look forward to earnings before interest and taxes (EBIT), impact of over €100 million within 4 years of the closing of the deal. Siemens also expects the deal to be EPS accretive within three years from closing.

Siemens CEO, Joe Kaeser, has been relentlessly working at restructuring the company into an effective and profitable organization since his appointment in July 2013. He has sold off non-core and less profitable divisions to get maximum value for their shareholders. On November 10, 2016, Siemens had disclosed that it planned to list its healthcare business. However, the exact details on the matter were not disclosed. He has been focused on the strengthening of the digital side of the business. In May 2016, Siemens completed the acquisition of CD-adapco, a privately held U.S. engineering software firm, which it had acquired for close to $1 billion.

Since Elliot Management had acquired 8.1% stake in Mentor Graphics, it has been under tremendous pressure. In October 2016, it was believed that Mentor Graphics was working with Bank of America to explore strategic alternatives including sale. It was speculated that the company had sent out feelers to large industrial companies with major software divisions like Siemens AG’s Dassault Systems SA, including private equity firms.

Stock Performance

Mentor Graphics’ share price finished yesterday’s trading session at $36.29, surging 18.29%. A total volume of 35.90 million shares exchanged hands, which was higher than the 3 months average volume of 1.83 million shares. The stock had been performing well of late as it has advanced 67.71% and 87.21% in the last three months and past six months, respectively. Furthermore, since the start of the year, shares of the company have rallied 98.54%. The stock is trading at a PE ratio of 66.96 and has a dividend yield of 0.61%. Shares of the company have a market capital of $3.90 billion.

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